USD/CAD Remains Under Pressure After Higher Crude Oil Draw

Summary:

USD/CAD is trading higher ahead of US jobs data. However, it remains under pressure after better-than-expected US crude oil draw.

USD/CAD is trading higher, even as it remains on a downtrend. As a commodity currency, the Canadian dollar has been finding support in the rising crude oil prices. Late on Tuesday, the American Petroleum Institute (API) indicated that US oil inventories dropped by 5.360 million barrels in the past week. The figure is better than the expected draw of 2.114 million barrels and the prior reading of -0.439 million barrels.

Subsequently, WTI futures are up by 0.69% at $69.23. Notably, about 98% of Canadian oil exports are to the US. A decline in US oil stockpiles is an indication of rising demand. The subsequent rise in the commodity’s prices is a bullish catalyst for the Canadian dollar. Investors are now keen on whether the EIA’s data will confirm API’s trend later on Thursday.

USD/CAD will also be reacting to the US job data. To begin with, economists expect the ADP nonfarm employment numbers to have risen by 650,000 in May compared to the prior 742,000. A higher-than-expected figure will help strengthen the US dollar. At the same time, the initial jobless claims are forecasted at 390,000, which is lower than the prior week’s 406,000. A decline in new unemployment claims will boost USD/CAD.

USDCAD technical forecast

USD/CAD is up by 0.06% at 1.2042. Despite being in the green, it is still on a downtrend. On a three-hour chart, it is trading below the 25 and 50-day exponential moving averages. As such, there is a probable curbing of its gains in the near term.

I expect the currency pair to rise to yesterday’s intraday high at 1.2090, where it will experience resistance. It may then drop to find support at 1.2000. On the upside, a move above 1.2100 will invalidate this thesis.